Located in the Middle Magdalena basin of Colombia, the VMM 2 E&P contract is one of three adjacent contracts that Canacol has interests in, representing 126,000 net acres that expose the company to a potentially large, unconventional shale oil play.

Canacol Energy president and CEO Charle Gamba said the company will with ExxonMobil team to explore the substantial shale oil potential on the VMM 2 contract.

"At the same time, Canacol has chosen to retain its 100% interest in the adjacent Santa Isabel E&P contract in order to capture all of the upside on the block should the play prove commercial on the adjacent VMM 2 and VMM 3 blocks," Gamba said.

According to the FOA, ExxonMobil will carry the cost of the drilling and testing three wells for conventional and unconventional targets in the La Luna and Rosablanca, oil source rocks in the area.

ExxonMobil will pay 100% of the cost for first two vertical wells up to $15m each and the will pay $17.5m for the third if it is horizontal multi-stage fractured well.

In return, ExxonMobil shall earn 50% of Canacol’s 40% total interest in the two contracts – 20% each in VMM2 and VMM3.